NDP urges construction tax relief

Industry ‘hurting,’ seeing declines in jobs, earnings due to PST change: finance critic

REGINA Construction earnings and employment fell more sharply in Saskatchewan than in any other province during 2018, the first full year the PST was charged on the full value of construction contracts.

The mood in the industry is “sombre,” and the NDP is using the latest news to push for tax relief.

According to new data released by Statistics Canada, average weekly earnings in Saskatchewan’s construction industry fell from $1,360.19 in December 2017 to $1,233.08 by the end of last year. That pushed Saskatchewan down from second among the provinces to slightly below the national average.

Employment in the sector dropped from 30,261 to 28,336 workers over the same period.

Though Alberta shed more construction workers, Saskatchewan led the country in percentage losses in both categories. Most provinces saw employment and earnings rise in construction.

In a news release sent to reporters on Wednesday, the Saskatchewan NDP connected the industry’s plight with the provincial government’s 2017 decision to apply provincial sales tax (PST) to construction contracts.

Previously, PST had applied only to construction materials. But the 2017-18 budget had the effect of extending it to labour and overhead, since the tax is now imposed on the final contract or sale price. The decision took effect in April 1, 2017.

The change added about $197.6 million to provincial coffers that fiscal year, less than the anticipated $350 million.

“The Sask. Party has stubbornly stuck to this damaging tax hike, meanwhile construction companies throughout the province are hurting from real consequences,” NDP finance critic Trent Wotherspoon said in the release. “With so many jobs and contracts lost, the right move for the province’s economy would be to scrap this tax hike in the upcoming budget.”

The CEO of the Saskatchewan Construction Association (SCA) says the NDP is right to draw a link between the tax hike and the Statcan data, which further underlines what he called a “sombre” and “uncertain” mood in the industry.

“There’s no doubt that adding the PST onto construction labour is a tax on investment and a tax on growth,” said Mark Cooper. “That’s not a good choice, and we’ve said that pretty consistently.”

Cooper said the SCA is preparing to do a quantitative analysis of how badly losing the exemption has stung the industry. But anecdotal evidence suggests a “dampening effect,” at the very least.

“There’s no doubt about that,” Cooper said.

The government has already acknowledged that the changes would have an effect on the economy. In a statement Wednesday, it argued there are other factors at work, including the resource downturn and federal changes to mortgage rules.

The statement called the 2017 decision “difficult, but necessary” as the province attempted to balance the budget and reduce its reliance on “volatile resource revenues.” It noted that the government is still planning to achieve a balanced budget by the coming fiscal year.

“When the budget is balanced, our government will be in a position to take a fresh look at our entire range of tax policies, to determine whether we might be able to provide some tax relief to our residents in areas where it is most needed and would have the greatest economic impact,” the statement said.

Cooper said the industry wants the exemption restored “as soon as possible,” but he acknowledged the difficult financial situation. He has no illusions that the government will reverse itself this year.

“I think they’ve been very clear that they will not,” he said.

“We disagree, but we understand that and take them at their word that it’s something they will look at.”